EXCLUSIVE: HOW THIS MAN BUILT A $250M IT COMPANY

Written on the 28 January 2011

May 2010

In a demountable building out the back of a hide processing plant, Adrian Di Marco started to develop software for his business TechnologyOne. That was 1987. The tech savvy entrepreneur can now challenge the likes of Oracle, Microsoft and SAP for market share, with a $15 million R&D facility planned to open later this month.

MORE than two decades ago Adrian Di Marco saw an opportunity for a profitable business, but the prevailing ‘cultural cringe’ denied him access to venture capital.

Having worked for large multinationals and seen their product flaws, he knew there was room for a new player that developed higher quality software, even if it took longer.

“I started in this industry and like a lot of people I worked for big multinationals, and one of the things I came to realise was just how bad the software was,” he says.

“I originally had a perception that anything that came out of America would be the best in the world, but it was quite a shock to me when I started to work on the stuff and saw just how badly thought through it was.

“If you look at markets like America, they’re so big that it’s really about time to market because they want a return very quickly, so by definition product quality suffers.”

With his idea to build software at home in Australia he was able to access angel funds from former customer Dugald Mactaggart, setting up shop outside a Hemmant-based hide processing factory.

“They were very humble beginnings and it shows you can build software anywhere, just as easily from the back docks of Brisbane, as in Silicon Valley as in Alaska.

“That’s the beauty of software, the magic of software, and all you need is a bit of a vision, a bit of a passion and some talent.”

Today, Technology One Limited (TNE) provides software solutions to a large cross section of businesses and organisations and as Di Marco says, “there’s not much we don’t do that a corporation needs.

“We do everything – the financials, the supply chain, the HR and payroll, the works, the assets, the project management, the business intelligence, customer relationship management, we do the billing, the profiting, the rating, student management, performance, strategic planning.”

The who’s who list

The business is doubling in size roughly every four years, with a return on investment (ROI) that ranks in the top 25 for Australia’s publicly listed companies.

The contracts keep coming, with recent clients including the High Court of Australia and Skills Victoria which assisted a 30 per cent unaudited profit spike in the March quarter, as well as a more recent deal with Carnegie College in Scotland.

“If you look at our customer list we have about 900 major Australian and New Zealand companies who use our product, it’s a who’s who list,” says Di Marco.

“We’ve got Channel Seven, Mitre 10, all the TAFE colleges, some of the biggest universities in Australia, some of the biggest councils, prestigious departments like the Department of Prime Minister and Cabinet, and I think we’ll keep winning those product deals.”

Di Marco points out that there are not many new customers in the software market, so to win business TechnologyOne has to take them from competitors, which has not been well received by Oracle, Microsoft and SAP.

“It’s a zero sum game. This business is all going to become who keeps their customers and who loses them and our business model is oriented around that,” he says.

“Our business model is one where we take responsibility, so we do the whole thing, we build it in our R&D labs, we then market it with sales, we implement with support, so it’s the total from whoa to go.

“If you look at our competitors, what they do is they build the software but then they use third parties to implement it, and that creates, we believe, a recipe for disaster, because no one understands the software to the extent that we as the developers understand it.”

He says the business models of the multinationals are outdated and often mean the customer pays, but there’s very little they can change as they are so centred around outsourced implementation.

“But because we don’t have implementation partners we have to stand on our own two feet – we never get recommended by independent consultants as there’s no business in it for them.

“So we pay a price for this business model we have, but we end up with much happier customers.

“We had a deal in New Zealand we just won against these big multinationals, and in this particular case the customer said to me they actually came to the conclusion the independent consultant was not independent, because they would not recommend TechnologyOne even though the users wanted our product.”

Di Marco cites several aggressive tactics from competitors such as trying to block clients from switching software, cutting prices and ‘slicking mud’ on the company.

Innovative leader

While TechnologyOne’s counterparts continue to outsource their R&D centres to India, Di Marco is passionate about the innovative talent of Brisbane and will open a $15 million R&D facility in Fortitude Valley this month.

“It’s about creating that next platform for growth, so this new R & D is important for that, it consolidates everyone in one location, it’s a state-of-the-art centre as well which will really enhance collaboration, creativity and innovation,” he says.

“All the R&D projects we had on the go have continued, so we’ve gone through that very bleak 12 month period, kept all our staff, and now we’re in a great position as the market’s starting to turn, because all those projects are coming to completion.

“You look at some of our competitors and they’ve let thousands of staff go, they’ve cut so many projects, It’s going to take them years to get back to where they were so that’s going to give us a huge competitive advantage.”

He expects TNE to invest $120 million in the Valley centre within the next five years and in that time he expects the UK economy will have turned around, giving the company greater traction in that market.

“The UK is a big market, there’s huge potential for us, but the fact is that with the GFC people are risk averse, and we’re a new player,” he says.

“People are saying look, you’ve got the better product but unfortunately you’re the new player and unfortunately we’re not prepared to take that risk in this environment, but we are still winning business.

“We’ll use this period of growth in Australia and New Zealand to seed the UK, and once that takes off and we get that runway happening, then we’ll start to seed the US.”

Tech support

To challenge the ‘cultural cringe’ towards Australia’s technology sector which presented hurdles for his own business early on, Di Marco is chairman of Queensland inQbator, which raises funds for local start-ups.

He says the mining industry has become like a ‘drug’ for the Australian economy, but it could be more useful for the long term if a greater portion of profits went towards start-up technologies.

“We’ve got all this money coming out of the mining industry, so why don’t we take some of that money and use that to seed some new industries and support those new industries.

“We’re not saying support us. We don’t need support as we’re a viable business, we’re strong and we’re doing our own thing, but we’re talking about those who are starting out.”

“Currently the way it happens is through a natural process which means out of every 100 companies probably one gets through, but with a more concerted effort and support you’d have maybe 10 in 100 succeeding, and that changes the whole dynamic.”

Di Marco feels satisfied at the increasing interest in his company from some of Australia’s biggest companies making the switch, but he looks forward to the day ‘the penny drops’ with the nation’s leaders to give greater support to technology development.

“Every deal we win it’s against those guys (multinationals), and if people buy it’s not because it’s with a Brisbane or Australian product, they buy it despite the fact we’re Australian.

“It’s that cultural cringe which is one of the biggest problems we face as a nation – we need to understand that we have the talent in this country to do amazing things and we need to harness that challenge.

“Brisbane has the potential to become the Silicon Valley of the Asia-Pacific region, but that’s another conversation.”

Adrian Di Marco’s views on:

Brisbane’s talent
I walk around the R&D centre and see what these guys are doing and it just blows you away. They are creative, they’re talented, they’re passionate, but the interesting thing is they don’t have the egos. In some ways I don’t think they realise how good they are.

Competition for staff
There’s not a lot of companies doing the sort of work we’re doing in Brisbane. The only company that really came close was Mincom but they got taken over by an American company and a lot of their R&D appears to be going overseas. There are some other companies around, good companies, GBST is great but the number of people they need for R&D is much smaller than us.

Not selling the business
Would we sell at the right price? I wouldn’t be selling, my shareholding’s not up for sale anyway, but we are a publicly listed company so in the end it depends what the other ones want to do as well.
Our ROI is amazing, our profit margins are significant, and they’re just going to get better and better, so I think TechnologyOne has got a great future over the next 10 years.
We have a huge growth profile so to me I would not want to see the company sold. There’s too much fun ahead, we’ve done all the hard work.

The Royal Children’s Hospital Foundation
It’s part of being involved in the community isn’t it? Giving something back, I would have been on a number of boards over the years and I just decided that I wanted to get involved with a board that was a not-for-profit, so it was a good opportunity when it came up. It’s nice to do something using the expertise and knowledge that you have in a not-for-profit way.

Time off

I love to go for runs, walks, gym, all of that, I’m very much into healthy lifestyle. I like to travel a bit too for fun, and I spend as much time as I can near the water.
I love the ocean, I was a surf lifesaver in my youth and always loved the ocean.

Inspiration
I’m just an avid reader of autobiographies of businesspeople, people that have created businesses and what they’ve done, like the people who started Oracle, the founders of SAP and they’re great stories.
Whether it be Morgan Stanley, Thomas Edison, Henry Ford or Walt Disney, the thing I love about these stories is that
they are normal everyday people – not gods or titans – who did something amazing.
It wasn’t that they were amazing, they were simply the catalyst for creating something amazi